Target: ₹272
CMP: ₹190.90
DCB Bank reported a strong performance in Q4FY26 with balance sheet growth remaining above system (deposits up 20.9 per cent year on year and loans up 17.6 per cent), NIM saw a sharp improvement in asset quality.
Net slippages turned negative (-21 bps vs. 45 bps in Q3FY26), while gross slippages (ex-gold) declined to 1.5 per cent, with broad-based improvement across segments. The bank’s standard restructured book declined by 17.6 per cent to ₹780 crore (1.3 per cent of loans). With improving business traction and normalising collections, we expect the bank’s net slippages to remain contained at sub-50bps levels in the near-term.
Credit growth was led by strong traction in gold (72.9 per cent), corporate (54.7 per cent) and agri (19.6 per cent). The management guides for 18-20 per cent growth in FY27 with incremental growth from mortgage, MSME and CV segments.
We expect margin to remain range bound, as yield pressure is likely to be offset by further easing in funding cost. Fee income grew 23 per cent, led by strong traction in third-party distribution, forex and trade finance, while opex growth of 11.3 per cent lagged business growth. Core operating profit grew 27.5 per cent.
Looking ahead, we expect profitability to improve structurally with RoE sustaining an upward trajectory from 11-12 per cent to 13-14 per cent over FY27/28e. We maintain Buy rating on the stock with a 12-mth TP of ₹272, valuing it at 1.1x FY28e P/ABV.